Audit of contracts – part II
In the previous post, we began the thread of the model audit of contracts with suppliers. In this we will finish the topic, and we will analyze the impact of the control on relations with suppliers.
Operational meetings with the purchasing department
Another point of the auditors' work are operational meetings with representatives of the purchasing department. The goal is to analyze the alignment of the contract execution with the contractual provisions. During the meetings, the auditors also evaluate communication and risk. They also check the impact of SLAs with suppliers on the key KPIs of the company.
Modern IT tools in contract management
The next stage is the analysis of the digitalization level of the contract management. In this area we often observe huge reserves. Its aims to identify the possible benefits associated with using innovative IT technologies such as machine learning, tokenization from Blockchain or ESSA.
The final stage of the contract audit is the preparation of the report. Most often it contains the list of recommendations regarding:
- Supply management’s risks reduction
- KPI optimization, leading to achieving company goals
- Optimizing the terms of cooperation with suppliers
- Automation and digitization of purchasing processes
- Improving cost efficiency
- Increasing an influence of suppliers on the company's competitiveness
Often the report also includes recommendations for the implementation or optimization of key suppliers' development programs.
The report is a great tool not only for purchasing department teams. It allows to identify potential advantages resulting from cooperation with selected suppliers and enables increasing the level of innovation.
Audit of contracts and relations with suppliers
One of the most common problems related to the audits of contracts is their impact on relationship with suppliers. It shouldn't be a surprise. Often suppliers do not feel comfortable with the audit.
This is why effective communication between the purchasing organization and suppliers is extremely important. It mustn’t be limited solely to the presentation of the audit objectives. Buyers should focus on a detailed justification of the reasons and presentation of the benefits resulting from an audit. Thanks to that, the risk of straining relationships with suppliers is minimized.
An interesting fact is that a well-prepared and executed communication plan can help strengthen business relationships. It turns out that the relevant information encourages suppliers to undergo an audit. Why? Well, suppliers can see the chance to improve their own business efficiency and credibility in the eyes of buyers. And that allows them to develop sales and gain advantage over their competitors.
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